Retailers in India leased nearly 4.73 million square feet of space across top cities in the first nine months of 2023, overcompensating for the slow expansion during the pandemic years.
Leasing between Jan and September was even higher than the entire 2022.
While top companies including Reliance Retail, Aditya Birla Fashion and Retail (ABFRL), D’Mart, Tata’s Trent, Shoppers Stop, Lifestyle and Starbucks continued to add stores, companies such as Uniqlo, Latin Quarters, Meena Bazaar and Lee and Wrangler have also started expanding brick and mortar stores.
According to CBRE data, retail sector leasing witnessed 46% Y-o-Y growth in the Jan-Sep 23 period. The total absorption across the top 8 Indian cities stood at 4.73 million sq ft, compared to 3.23 million sq ft during the same period last year.
Fashion & apparel and home & department stores accounted for over 50% share in leasing. In terms of cities, Bangalore, Delhi-NCR, and Pune collectively accounted for a share of over 61% in leasing during this period. Supply addition also recorded a 577% Y-o-Y increase in Jan-Sep 23, crossing 2.98 million sq ft.
“With the surge in newly available spaces and the onset of the festive season, we anticipate a continued upswing in space utilization. Although we expect consumer spending and retail sales to stabilize compared to the unprecedented growth of the previous year, we foresee continued growth in categories such as restaurants, hotels, transportation services, vehicle purchases, as well as apparel and footwear,” said Anshuman Magazine, Chairman & CEO – India, South-East Asia, Middle East & Africa, CBRE.
Operating profit margin for Shoppers Stop remained under stress due to weak sales mix and negative operating leverage. However, the business plan to aggressively ramp-up the value format business (Intune) from current 6 stores to 24 store in FY24 and 84 stores in FY25 augurs well, given the strong unit economics.
“There have been a bit of slowdown for the past six months but with festive season and winter arrival is happening simultaneously, we expect a jump in demand. That is why we have opened stores to cater to the growing demand,” said Rahul Bhalla, CEO and cofounder of Latin Quarters, a women’s western wear brand.
During Jul-Sep’23, the top 8 cities also saw a 100% Y-o-Y growth in mall completions. Pune led the growth in supply addition with a 58% share, followed by Delhi-NCR at 19%.
“With malls becoming entertainment centres, footfalls in brick-and-mortar stores are expected to continue rising,” said Ram Chandnani, Managing Director, Advisory & Transactions Services, CBRE India.
Experts feel leasing in 2023, could outpace even the 2019 level when retailers cumulatively took up a record 6.8 million sq ft of new space.
CBRE said that easing likely to strengthen further, given the strong supply pipeline and strong domestic demand, although global headwinds might cause a short-term anomaly.
Compared to other economies, Indian consumers remained confident about their personal economic situation despite the current global outlook. Although household spending has held up so far, consumers are likely to keep a close eye on the inflationary pressures and their impact on the prices of commodities going forward.
Source: The Economic Times